National Association of Home Builders Discusses Economics and Housing Policy

Share of Delinquent Mortgages Continues to Fall

According to the most recent release of the Mortgage Bankers Association’s National Delinquency Survey, the share of mortgages that are considered delinquent continued to fall. On a seasonally adjusted basis, the share of mortgages past due declined to 5.68% in the fourth quarter of 2014, 17 basis points from the third quarter of 2014 and 71 basis less than its level in the fourth quarter of 2013. At 5.68% the delinquency rate is at its lowest level since the third quarter of 2007.

The decrease over the year in the not seasonally adjusted share of mortgages past due reflected declines over each stage of delinquency. The proportion of mortgages 30-59 days past due fell by 31 basis points to 2.97% while the percentage of mortgages considered 60-89 days past due shrank by 13 basis points to 1.02%. The share of mortgages 90 or more days past due decreased 30 basis points to 2.25%. As Figure 1 shows, mortgages 90 or more days past due averaged 0.8% between 1980 and 2005. However, the percentage of mortgages 90 or more days past due soared during the most recent recession, peaking at 5.1% in the fourth quarter of 2009. Since then, the share of mortgages 90 or more days past due has declined significantly.

A previous post illustrated that the decline in the serious delinquency rate partly reflects the tightened standards placed on mortgage lending. Earlier work demonstrated that tight lending standards, on net, still prevail at commercial banks, smaller commercial banks in particular, and Fannie Mae’s Mortgage Lending Sentiment Survey confirms this result. However, while net lending standards at depository institutions remains tight, Fannie Mae’s Mortgage Lending Sentiment Survey also shows that lending standards at the mortgage banks have begun to ease.

The Mortgage Lending Sentiment Survey asks mortgage lending partners, both depository institutions and mortgage banks, to compare the current lending standards at the partner’s institution relative to those that prevailed one year ago, the end of 2013. As Figure 2 below depicts, a net share of 3% of mortgage lenders, both depository institutions and mortgage banks, reported that lending standards at the end of 2014 where tighter compared with 2013. The net share is calculated as the difference between the percentage of banks that reported easier lending standards and the proportion of banks reporting that lending standards had tightened. According to the chart, the net tightness in lending standards across all mortgage lending institutions reflects still tight standards at depository institutions. A net portion of 14% of depository institutions reported that lending standards had tightened over the past year. In contrast, a net of 17% of mortgage banks reported that lending standards at their institution had eased in the past year.